Office of AdministrationDivision of Budget and Planning

MEDICAID RESTRUCTURINGBUDGET BACKGROUND

Background Information

Cost for new Medicaid eligibles

Savings in state share for existing populations

Additional revenue

Summary of budget impact

Provider payments

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BACKGROUND INFORMATIONMissouri currently provides Medicaid for parents up to

19% of the Federal Poverty Level (FPL).

- For a family of four, $4,475 per year.

Missouri does not provide Medicaid to non-custodial adults, unless they are disabled or seniors.

In the future, would cover low-income working adults up to 138% of the FPL.

- For a family of four $32,499 annual income.3

BACKGROUND INFORMATIONMissouri’s typical federal match rate for the current

Medicaid Program is 62%.

Missouri provides Medicaid currently to about 900,000 Missourians:

- 543,000 children;

- 166,000 persons with disabilities;

- 80,000 low income parents;

- 76,000 low income elderly; and

- 28,000 pregnant women.4

MEDICAID RESTRUCTURING BUDGET PROJECTIONS

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COST -- STATE SHARE

No state cost for first three fiscal years (FY14-FY16).

State share then phases up to 10%:

- January 2017 – 5% (half year for FY 2017);- January 2018 – 6%;- January 2019 – 7%; and- January 2020 – 10% .

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COST -- NUMBER OF PEOPLE

KEY ASSUMPTIONS

Assumed Take Up Rates (% of eligibles who sign up): Parents -- 70% increasing to 80% by 2018Childless Adults -- 60% increasing to 80% by 2018Medically Frail -- 95% from first year

Data Sources:U.S. Census Bureau 2011 American Community SurveyU.S. Census Bureau 2010 Table on Prevalence of Disability

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MEDICAID PROJECTIONS NUMBER OF PEOPLE

115,685 115,685 115,685 122,626 129,567

124,032 132,572 141,112 149,653 158,193

19,782 19,782 19,78219,782

19,782

0

50,000

100,000

150,000

200,000

250,000

300,000

FY2014 FY2015 FY2016 FY2017 FY2018Parents Childless Adults Medically Frail

259,499 268,039 276,579292,061

307,542

COST PER PERSON Developed by actuary

Added cost for wrap around for medically frail

Pay a commercial reimbursement rate

Savings from better care coordination (multiple avenues)

Assumes maximum cost sharing (copays) allowed9

COST PER PERSON

Per Member/Per Month

- $436 for parents- $583 for childless adults- $1,635 for medically frail

Trended forward at average of 4%

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COST – SUMMARY (millions of $s)

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$907.5

$1,857.8$2,032.1

$2,239.7 $2,329.7

$0.0

$0.0

$30.1/$23.9

$69.4$115.6$86.6

$143.3

$750.0

$1,250.0

$1,750.0

$2,250.0

$2,750.0

FY 2014 FY 2015 FY 2017 FY 2019 FY 2021Federal Other GR

MEDICAID RESTRUCTURING SAVINGS IN STATE SHARE

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SAVINGS – EXISTING POPULATIONSCurrent Medicaid Populations under 138% FPL

- Pregnant women – covered prior to pregnancy

- Ticket to Work

- Breast/Cervical Cancer

- Spenddown

- Women’s Health Services

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SAVINGS – EXISTING POPULATIONSCurrent State Only Populations under 138% FPL

- Blind Pension

- Corrections

- Dept of Mental Health Clients

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SAVINGS – EXISTING POPULATIONSGENERAL REVENUE (millions of $)

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MEDICAID RESTRUCTURING ADDITIONAL REVENUE

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ADDITIONAL REVENUEKey Assumptions – Income Tax

- No multiplier assumed

- Looked at increased federal revenue to providers

- Discounted to portion typically used for salaries based on individual provider-type

- Applied 4.5% income tax rate

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ADDITIONAL REVENUEKey Assumptions – Sales Tax

- No multiplier assumed

- 19.2% of income spent on GR taxable goods

- 6.9% of non-salary spent on GR taxable goods

- Tax rate of 3% goes to GR

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ADDITIONAL REVENUEKey Assumptions – High Risk Pool

- High Risk Pool no longer necessary

- Insurance companies help fund pool through assessments

- Taken as credits against taxes owed

- Typically do not take full credit in first year

- Fully realized ($22M), with $1.5M savings from normal growth each year after that

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ADDITIONAL REVENUE$s in millions

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$9.9

$30.5 $32.4 $33.5$2.8

$6.0 $6.4 $6.3

$2.9

$17.0$18.5 $22.0

$0.0$10.0$20.0$30.0$40.0$50.0$60.0$70.0

FY14 FY15 FY16 FY17Ind Income Tax Sales Tax Tax Credits

$15.6

$53.5$57.3

$61.8

MEDICAID RESTRUCTURINGBUDGET SUMMARY

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MEDICAID RESTRUCTURINGBUDGET SUMMARY

State costs for new eligibles $0 until FY 2017

Full phase in of state share at 10% in FY 2021

Savings for existing populations begin immediately

Additional revenue estimate conservative – no multiplier

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BUDGET SUMMARYCOST, SAVINGS & REVENUE

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General Revenue Summary - (Dollars in Millions)FY14 FY15 FY16 FY17 FY18 FY19 FY20 FY21

Cost New Eligibles $0.0 $0.0 $0.0 ($30.1) ($69.3) ($86.6) ($117.6) ($143.3)

Savings $31.0 $71.4 $82.3 $81.2 $78.9 $79.6 $78.4 $78.0

New Revenues $15.6 $53.6 $57.3 $61.8 $63.0 $65.0 $67.2 $69.6

Net Positive Impact $46.6 $125.0 $139.6 $112.9 $72.6 $58.0 $28.0 $4.3

PROVIDER PAYMENTS

Hospital ReductionsRegardless of a state’s decision to expand Medicaid,

payments to hospitals will be reduced.

Reductions will be to Disproportionate Share Hospital (DSH) payments.

Hospitals that serve a high percentage of Medicaid and/or other low income individuals qualify for DSH payments.

These payments are designed to help cover the cost of uncompensated care.

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HOSPITAL PAYMENT REDUCTIONSEach state’s share of the DSH reduction is unknown.

HHS Secretary will determine methodology.

That methodology to consider:- Percentage of uninsured,- State’s use of DSH funds, and- State’s current DSH level

(high DSH states, like Missouri, may face a larger cut).

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HOSPITAL PAYMENT REDUCTIONSMedicaid DSH cuts at the national level:

- 5% for first three years- 15% for next year- 50% thereafter

Missouri’s FY 2013 DSH payments:- $511 million hospitals- $207 million DMH hospitals

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HOSPITAL PAYMENT REDUCTIONS

Hospitals will also see cuts in Medicare payments.

These payments do NOT flow through the state.

Medicare DSH cuts comparable to Medicaid.

Medicare direct inpatient payments will also be reduced (reduction in trend).

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PROVIDER PAYMENTSMEDICAID RESTRUCTURING

Estimated payments by provider type: 49% ($900 million) professional services

- 13% ($240M) mental health- 11% ($200M) physician services- 9% ($160 M) in-home- 16% ($300M) other (DME, ambulance, ….)

40% ($740 million) hospital services

11% ($200 million) pharmacies28

CONCLUSIONRestructuring Medicaid has a net positive impact on

the budget

Cuts to hospital payments will happen

Those reductions will be mitigated through increased provider payments, if restructure

Other considerations - indirect budget implications:- Improved access to care- Better health outcomes- Improved job retention when healthy- Reduce cost shift to private premiums

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